Just to add to Rich’s piece on the homepage, I saw this comment by “a senior Democratic aide” on the bailout strategy:
An official in the auto industry told CNN that bringing the Colombian pact into the negotiations could be a poison pill that prevents passage of an auto industry package. But a senior Democratic aide suggested Congress may be willing to call Bush’s bluff and try to pass an auto industry aid package without the trade deal.
The senior aide said Democrats do not believe “this president wants to add the demise of GM to his legacy list.
Nice threat there. I expect we’ll have the same nonsense from Pelosi and Reid where they won’t put forth legislation unless they can hang Republicans on it as well.
The financial news out today suggests that GM will have to declare bankruptcy by the end of the year unless the feds step in, but I wonder how accurate this conclusion is and how much of it is hyperbole to try to force President Bush’s hand:
Bill Ackman, manager of the Pershing Square Capital Management LP hedge fund in New York, said GM shouldn’t take government money because “it has been hamstrung for years because it has too much debt and it has contracts that are uneconomic.”
Ackman, who said he doesn’t have a position in GM securities, said yesterday on the Charlie Rose show the automaker should file for a so-called prepackaged bankruptcy with financing to keep operating while in court protection.
That may be difficult. Such debtor-in-possession loans have “all but shut down,” CreditSights Inc. said yesterday in a report. The loans, which are paid off when companies exit bankruptcy, aren’t being made as lenders become more averse to risk, wrote Chris Taggert, a New York-based analyst.
Rather than a bailout, why not have the feds provide the debtor-in-possession loan, which would allow GM to declare bankruptcy with a chance of going through the reorganization it needs?
Along these lines, the auto-blog, Jalopnik, has a good write-up on why allowing GM to go bankrupt is actually a good thing. An excerpt:
So what happens when they hit that wall and actually have to throw down the B-word? Nobody knows for sure, and anyone who claims they do is full of more bull than Bank of America after swallowing up Merrill. But, one thing’s clear — any form of court-mandated reorganization allows GM to reevaluate all sorts of deals — like the one recently signed with the UAW, with suppliers and most importantly, with creditors seeking repayment on the $43 billion in debt and $80 billion in other liabilities on the books at the General — potentially allowing the automaker to wipe some of that out. More importantly, just like the airlines, it’ll give them the time to continue selling their ever-better vehicle lineup. True, many folks may be scared of buying vehicles from a company that’s declared bankruptcy but of course, that didn’t stop people from piling into Northwest planes after the airline did the same. And that’s where they and we, have got some hope.